How to Get a Debt Consolidation Loan If You Have Bad Credit

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You have a mound of debt and you’re not sure how to repay it. You’ve considered taking out a personal loan to consolidate the debt, but it’s hard to find debt consolidation loans for bad credit.

If you’ve had issues repaying your debts, you might have damaged your credit score. The very reason you need a consolidation loan might also be why you can’t get one.

Here’s a look at resources that can help you if you need a debt consolidation loan for bad credit.

Debt consolidation loans and credit scores

Borrowers can use a debt consolidation loan to pay off debts and replace them with a single loan. The new loan is a chance to lower monthly payments or find a cheaper interest rate.

But qualifying for a new loan with bad credit is tricky. Loan applicants will need a credit score in the mid-600s or higher for easy approval and low rates.

With a credit score below that, it will take some work to find loans for which you qualify. Expect to accept some tradeoffs, such as limited options in lenders and loan types, and higher interest rates or loan fees.

7 ways to get debt consolidation loans for bad credit

A bad credit score will make it trickier to qualify for a loan, but it’s still possible to get debt consolidation loans for bad credit. Try the following to get the debt consolidation loan you need — even with poor credit.

1. Student loan consolidation options

If the debt you’re trying to consolidate is student loans, you’re in luck.

Student loans are much harder to get rid of than other debts and aren’t dischargeable in bankruptcy. For lenders, this makes student loans a less risky form of debt. For borrowers, this can mean lower and more flexible credit requirements to qualify for student loan refinancing.

Lenders such as Earnest, for instance, have no minimum credit requirements for student loan refinancing. They will look at your credit score, but they also consider your application based on criteria such as your education and employment history.

If you’re struggling with student debts, you’ll want to consider other options as well. Federal student loan consolidation could help, as well as income-driven repayment plans.

2. Try lenders with low credit score minimums

If you have a low credit score, don’t automatically assume you can’t get a loan. Lenders have different credit requirements and many are willing to consider lending to those with bad credit.

With some searching, you can find a debt consolidation loan for bad credit.

Avant, for example, offers unsecured personal loans for borrowers with credit scores as low as 580. Similarly, Upstart considers borrowers with credit scores as low as 620. Make sure you read lender reviews and choose a reputable lender. Also, keep in mind that a lower credit score might result in higher interest rates.

3. Get a cosigner

Many lenders won’t offer debt consolidations loans for people with bad credit, but they might approve your loan application if you have a co-applicant with good credit.

To get a cosigner on a debt consolidation loan for bad credit, you’ll need two things: a willing cosigner and a lender who allows co-applicants. Lenders such as Citizens Bank and Earnest allow cosigners for their personal loans.

See if a partner or family member who has good credit is willing to cosign the loan and you’ll have a better chance of approval on debt consolidation loans for bad credit.

4. Check with a credit union

Credit unions are not-for-profit financial institutions that focus on serving a community. Credit unions often offer less-conventional products, including debt consolidation loans for people with bad credit. Members often get some of the lowest rates when borrowing from a credit union.

Check with local or national credit unions to see what options they offer for your credit score. A credit union might have personal loans designed specifically for borrowers with poor credit.

A credit union’s loan officers also often have more say in the underwriting process, so you can make your case to a human instead of getting an immediate rejection from a computer algorithm.

5. Nonprofit debt consolidation

In addition to credit unions, there are some nonprofit organizations dedicated to helping people manage and get out of debt. These nonprofit debt counseling agencies often offer free credit counseling and debt assistance.

Find a nonprofit debt counseling organization in your community or that offers services nationally. You should verify its not-for-profit, 501(c)(3) status.

Once you’re connected with these services, many of them will have a credit counseling session to explore your debts and repayment options. They might be able to connect you with lenders that offer debt consolidation loans for bad credit.

Some also offer in-house debt consolidation through a debt management program. The nonprofit organization can even negotiate with lenders on your behalf to lower rates or cancel a portion of your balances. However, you will likely face an additional service fee to set this up, as well as ongoing maintenance fees.

6. Secured loan

If you have some assets, you might consider borrowing against them with a secured loan to consolidate your debts. With a secured loan, your asset — such as a car or home equity — is collateral that the lender uses to guarantee the loan.

A secured loan has the obvious drawback of putting your property at risk. If you default, your lender can seize your property to settle the debt. But it also lowers the lender’s risk, so it’s much easier to get approved for a debt consolidation loan with bad credit.

It’s worth considering other options first, such as liquidating your asset and repaying debts with cash. But if the collateral is something you want to keep, a secured loan can help you keep ownership while borrowing the funds you need to consolidate debts.

7. Work on your credit and try again later

Last but not least, you can always spend some time repairing your credit and try again in a few months. If you can raise your credit score even 30 or 50 points, you can improve your chances of getting approved for a debt consolidation loan.

If your credit score is right on the verge of average (600 to 650), it can be worthwhile to focus on rebuilding credit.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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  1. Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
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  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
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Opploans currently operates in these states:

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. This information is current as of October 10, 2017 and is subject to change. Opportunity Financial, LLC lends or arranges loans in the following states: Alabama, California, Delaware, Florida, Idaho, Illinois, Kansas, Maryland, Missouri, Nevada, New Mexico, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin. We do not lend or arrange loans in all states. Opportunity Financial offers line of credit products in: Kansas, Tennessee and Virginia. Please note: This is an expensive form of credit. This service is not intended to provide a solution for longer-term credit or other financial needs. Loans made or arranged by Opportunity Financial are designed to help you meet your short-term borrowing needs. Loan amounts may vary and are dependent upon qualification criteria and state law. Refer to Loan Cost & Terms at www.opploans.com for additional details. Complete disclosures of APR, fees and payment terms are provided within the transaction documents, such as the Loan Agreement. First-time Opportunity Financial customers typically qualify for an installment loan of $1,000 to $5,000 with an APR from 59% to 199%. For example, a $1,000 loan made or arranged by Opportunity Financial with 12 bi-weekly payments of $130 has a 199% APR. After the 12th successful payment, the loan would be paid in full.
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